Chapter 6 Financial accounting Exam Questions with Complete Solutions
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Course
Financial Accounting
Institution
Financial Accounting
Comparable store sales - Answer-comparison of sales figures at established stores with existing "track records"
Contra-revenue account - Answer-a debit balance account that is offset against revenue in the income statement. Ex. Sales discounts, Sales returns, Allowances
consistency (in invent...
Chapter 6 Financial accounting Exam
Questions with Complete Solutions
Comparable store sales - Answer-comparison of sales figures at established stores with
existing "track records"
Contra-revenue account - Answer-a debit balance account that is offset against revenue
in the income statement. Ex. Sales discounts, Sales returns, Allowances
consistency (in inventory valuation ) - Answer-and accounting principle that calls for the
use of the same method of inventory pricing from year-to-year with full disclosure of the
effects of any change in method.
Cost of Goods Sold - Answer-the cost to a merchandising company of the goods it has
sold to its customers during a period
Gross Profit - Answer-net sales revenue minus the cost of goods sold
cost flow assumption - Answer-assumption as to the sequence in which units are
removed from inventory for the purpose of sale. Not required to paralleled the physical
movement of merchandise if units are homogenous
Gross Profit Margin - Answer-gross profit expressed as a percentage of net sales
cost layer - Answer-units of merchandise acquired at the same unit cost.comp
average-cost method - Answer-a method of valuing all units in inventory at the same
average per unit cost
Inventory - Answer-merchandise intended for resale to customers
Inventory Shrinkage - Answer-the loss of merchandise through such causes as
shoplifting, breakage, spoilage
Net Sales - Answer-gross sales revenue less sales returns and allowances and sales
discount. First figure shown in income statement
Operating cycle - Answer-the repeating sequence of transactions by which a business
generates its revenue and cash receipts from customers
Periodic Inventory System - Answer-eliminates the need for recording the CGS as sales
occur. Amount of inventory and CGS are not known until a complete physical inventory
at year-end
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